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December 2016

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Swedish home furnishing major Ikea has come a step closer to become the largest investor in India’s single-brand retail, as the Foreign Investment Promotion Board (FIPB), the Government of India’s single-window body to clear foreign investment proposals, has given its nod for the company’s proposal to enter Indian market.

The Swedish retailer proposes to invest Rs. 105 billion through a 100 percent subsidiary to enter the Indian market, initially by setting up 25 outlets across India.

Ikea was earlier reluctant to enter the Indian market due to the compulsory 30 percent sourcing clause applicable for foreign direct investment in the country’s single-brand retail sector. However, Ikea submitted its application after the Government relaxed the clause in September this year.

Ikea’s proposal has already passed the scrutiny by the Department of Industrial Policy and Promotion (DIPP), falling under the purview of the Ministry of Commerce and Industry.

Since the FIPB is authorized to directly clear FDI proposals only worth up to Rs. 12 billion, Ikea’s proposal now awaits the nod of the Cabinet Committee on Economic Affairs (CCEA).

The Indian Government is struggling to present a foreign investment-friendly image and hence the approval from CCEA should not be a problem, according to experts.

Ikea currently operates more than 330 stores in 44 countries. The company will build a supply chain network in India prior to rolling out its first outlet in three years time.